Mariner Energy Reports Net Income of $83.3MM for 4Q09

Mariner Energy reported fiscal fourth-quarter and full-year 2009 financial and operating results. For the three months ended December 31, 2009, the company reported net income of $83.3 million or $0.83 per basic and $0.82 per diluted share, compared with a loss of $648.9 million or $7.41 per basic and diluted share for the same period in the prior year. For the full year ended December 31, 2009, the company reported a net loss of $319.4 million ($3.34 per basic and diluted share). This compares to a net loss of $388.7 million ($4.44 per basic and diluted share) for 2008. Excluding a non-recurring, non-cash gain and certain non-cash charges, the company's adjusted net income for fourth quarter 2009 was $21.0 million or $0.22 per basic and diluted share, and for full-year 2009 adjusted net income was $92.2 million or $0.96 per basic and diluted share. Operating cash flow was $531.1 million for 2009. See the notes below for reconciliation of non-GAAP measures adjusted net income and operating cash flow.

Highlights for 2009 and first quarter 2010 to date include:

  • First quarter 2010 discoveries at Mandy, a deepwater oil field on Mississippi Canyon Block 199, and on South Pass 75, a gas field on the shelf, as well as the previously announced success at the Lucius sidetrack well on Keathley Canyon Block 875.
  • A 2009 drilling success rate of 63% (10 for 16) offshore, including the Heidelberg and Lucius oil fields in the deepwater Gulf of Mexico and the discovery and appraisal onshore of a new oil field at Deadwood in the Permian Basin.
  • Expanding into a new core area in the Gulf Coast with the acquisition of producing properties located principally in South Texas.
  • Building a new leasehold position in unconventional resource plays, including approximately 43,000 net acres in Wyoming, North Dakota and Arkansas principally targeting low-entry-cost oil opportunities.
  • A 12% increase in 2009 year-end estimated proved reserves to 1.087 trillion cubic feet of natural gas equivalent (Tcfe), a reserve replacement rate from all sources of 190% at a cost of $3.24 per thousand cubic feet equivalent (Mcfe) (see related notes below), and a year-over-year production increase of 7% to 126.5 billion cubic feet of natural gas equivalent (Bcfe).

"Mariner Energy continues to create and build value, our primary focus. Consistent with our business plan, we expanded onshore into new areas, conventional and unconventional, that should provide predictable and repeatable results going forward, while tapping the significant upside potential in our offshore exploration portfolio, principally in the deepwater. We've had another successful year with the drillbit in all areas and realized continued success in the prolific deepwater subsalt play. For the sixth year in a row, we increased our estimated proved oil and gas reserves, which now approach 1.1 Tcfe, a milestone for our company. The increase occurred without a material increase in the percentage of our proved undeveloped reserves. Our proved reserves do not yet reflect any contribution from a number of our deepwater discoveries, including the significant Heidelberg and Lucius discoveries as well as Bushwood, Wide Berth and Dalmatian and include only relatively small amounts from Balboa, Smoothie and the Deadwood field in the Permian Basin. These unbooked projects should significantly enhance reserves and production in future years. More than half of our proved reserves now are onshore. Additionally, almost half of our proved reserves are oil and liquids; and we have evolved into an oil company, especially when the unbooked discoveries, comprised largely of oil and liquids, are considered. Our excellent operational success in 2009 and early 2010 again validates our balanced business model," said Scott D. Josey, Mariner's Chairman, Chief Executive Officer and President.

NON-CASH GAIN AND CHARGES

The company's results for fourth-quarter and full-year 2009 reflect a non-recurring, non-cash gain of $107.3 million attributable to the December 31, 2009 acquisition of the subsidiaries and operations of Edge Petroleum Corporation. Based on lower average commodity prices for 2009, Mariner recorded full cost ceiling test impairments of its proved oil and gas properties in the amount of $754.3 million for full-year 2009 and $49.6 million for fourth quarter 2009. The company also recorded a non-recurring, non-cash charge of $12.0 million at year-end 2009 related to a contingent OIL withdrawal premium. Stock compensation expense of $25.4 million was recorded for the full-year 2009, which includes $7.1 million for the fourth-quarter. These items are detailed below in the reconciliation of adjusted net income, a non-GAAP measure.

FOURTH QUARTER 2009 RESULTS

For fourth quarter 2009, Mariner reported net income of $83.3 million, or $0.83 per basic and $0.82 per diluted share, which reflects the non-cash gain and charges noted above. This compares with a net loss of $648.9 million or $7.41 per basic and diluted share for the same three-month period in the prior year. Adjusted net income, which excludes the non-cash gain and charges, was $21.0 million for fourth quarter 2009, or $0.22 per share (see reconciliation of this non-GAAP measure below).

Net production for fourth quarter 2009 was 30.8 Bcfe, compared with 23.5 Bcfe for fourth quarter 2008. Total natural gas production net to Mariner for fourth quarter 2009 was 20.8 billion cubic feet (Bcf), compared with 16.1 Bcf for the same period in the prior year. Total oil net production for fourth quarter 2009 was 1.2 million barrels (MMBbls), compared with 1.0 MMBbls for the same period in 2008. Natural gas liquids net production for fourth quarter 2009 was 0.4 MMBbls, compared with 0.3 MMBbls for fourth quarter 2008. Mariner has begun posting its estimated monthly production volumes on its website (www.mariner-energy.com) on the last business day of the month following the applicable reporting period. The first such report, disclosing January 2010 estimated production, was posted on February 26, 2010.

For fourth quarter 2009, Mariner's average realized natural gas price was $6.08 per thousand cubic feet (Mcf) compared with $7.44 per Mcf for the same period in 2008. Mariner's average realized oil price was $77.96 per barrel (Bbl) for fourth quarter 2009, compared with $65.29 per Bbl for fourth quarter 2008. These average realized prices reflect settlements during the period under Mariner's hedging program. The average realized NGL price was $41.49 per Bbl for fourth quarter 2009, compared with $26.63 per Bbl for the same period in 2008.

FULL-YEAR 2009 RESULTS

For the year ended December 31, 2009, Mariner reported a net loss of $319.4 million, which equates to a loss of $3.34 per basic and diluted share. For 2008, Mariner reported a net loss of $388.7 million, or $4.44 per basic and diluted share. Adjusted net income, which excludes the non-cash gain and charges noted above, was $92.2 million for 2009 or $0.96 per basic and diluted share (see reconciliation of this non-GAAP measure below).

For the full-year 2009, Mariner reported net production of 126.5 Bcfe, up from 118.4 Bcfe reported in 2008. Daily production averaged more than 347.0 million cubic feet of natural gas equivalent (MMcfe), a record for Mariner. Total natural gas net production during 2009 was 90.8 Bcf at an average realized price of $6.08 per Mcf, compared with 79.8 Bcf for 2008 at an average realized price of $9.31 per Mcf. Total oil net production for 2009 was 4.5 MMBbls at an average realized price of $70.59 per Bbl, compared to 4.9 MMBbls during 2008 at an average realized price of $86.02 per Bbl. These average realized prices reflect settlements during the period under Mariner's hedging program. Total NGL net production during 2009 was 1.5 MMBbls at an average realized price of $33.10, compared to 1.6 MMBbls at an average realized price of $55.02 per Bbl for the prior year.

Operating cash flow was $531.1 million for the full 2009 fiscal year, compared with $885.9 million in 2008 (see reconciliation of this non-GAAP measure below).

 

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